New SAP America Inc. CEO and President Bill McDermott called for the elimination of 88 positions in addition to 44 terminations this week in his first significant move since taking his position. McDermott, who came to SAP from Siebel Systems Inc. late last year, is making the cuts as part of a reorganization of the German company's U.S. sales force.
"We are reorganizing the sales force on a regional basis, where previously we were organized around vertical industries," says SAP spokesman Jim Dever. "Our goal is to bring our sales force closer to the customer, and we have created a structure that enables us to do that."
"Eighty eight of the terminations are eliminated positions, and forty-four involved field sales positions, and SAP plans to rebuild the sales force to account for those forty-four positions," Dever says.
Bruce Richardson, senior vice president at AMR Research, says of the move, "Given that the primary selling opportunity is the installed base, it makes sense to adopt a more cost-effective sales model."
Richardson says he does not expect the move to have any effects on customer support, but says the layoffs send a serious warning for the existing sales force that performance is being monitored. "While this week's cuts affect about 10 percent of the sales force, it sends a strong message to the other 90 percent that performance is what counts," Richardson says.
The layoffs account for approximately three percent of SAP's total U.S. workforce, according to Dever. No additional layoffs are on tap for SAP, Dever says.
SAP has made no significant cuts since tech-spending trends went on a decrease--unlike other CRM vendors, including McDermott's last employer Siebel, which last July said it was cutting more than 1,500 positions.
Another rival company, Oracle Corp., announced it was cutting 850 jobs in its last fiscal quarter, and announced more layoffs in the current quarter, which ends next month.